x Abu Dhabi, UAEMonday 24 July 2017

US banks in spotlight over billions in transfers

Congressman seeks investigation into allegations of 'global money laundering' between the Gulf and America.

A senior US politician is calling for an immediate investigation into allegations of "massive global money laundering" by big US banks in their dealings with "persons from the Middle East". The call comes in a letter from Peter King, a Republican congressman from New York, to Eric Holder, the US attorney general, concerning the dispute between the Saudi business group Ahmad Hamad Al Gosaibi and Brothers and the financier Maan al Sanea.

The letter, a copy of which has been obtained by The National, expresses concern over the alleged money laundering and calls for the US government to investigate transactions involving billions of dollars that passed between the Gulf and New York banks. "I believe it is imperative to the national security and fiscal health of our nation that our government monitor such activity and scrutinise irregularities for violations of international law," said Mr King, the highest ranking Republican on the homeland security committee.

Al Gosaibi and Mr al Sanea have been locked in a dispute for a year after financial problems in the Bahraini units of their businesses. The al Gosaibi family has alleged fraud and theft of US$10 billion (Dh36.73bn) by Mr al Sanea, which he has denied. The dispute is being played out in a series of legal actions in New York, London and France. Mr King's letter cites allegations by Al Gosaibi that some $4.7bn of "suspicious transactions employed for the alleged fraud moved through one account at Bank of America in New York".

The new allegations highlight the role of The Money Exchange (TME), a remittance business owned by Al Gosaibi and based in Al Khobar, Saudi Arabia. Over the past 10 years, TME channelled billions of dollars from the Gulf to US banks in the course of its usual operations. "I remain puzzled by the lack of red flags raised by this purported money laundering scheme, accomplished within a major domestic financial institution over the course of several years, including many months when the US government invested billions of taxpayer dollars for the bailout of Bank of America," Mr King said.

"If the allegations against Mr al Sanea prove correct, I fear that the systemic failure to detect such a significant money-laundering scheme from a high-risk region could serve as a presage for even more ominous events, perhaps even significant sources of terrorist financing." Mr King's claims could strike a chord with the administration of the US President Barack Obama, which is on a high-profile campaign of banking reform after the financial crash.

The congressman has a track record of involvement in controversy in the Middle East, having helped organise the lobby against Dubai World's purchase of the P&O ports business in 2006. US ports were eventually excluded from the Dubai deal. Mr King's letter will also raise the stakes in Saudi Arabia, where the authorities have been conducting an internal investigation into how Al Gosaibi and Saad Group, Mr al Sanea's holding company, came to owe $22bn to more than 100 Gulf and international banks.

Some creditors have given up waiting for a government-brokered solution and have begun to sell their distressed debt on global markets. Mr King wrote: "I realise that the success of this system [of measures to combat money laundering] relies on intelligence-sharing with our international allies and Saudi Arabia plays a critical role in that objective … Nevertheless, I am troubled by the prospect that the US banking system might have been used to perpetrate an alleged fraud of this size and magnitude within the American city most targeted by terrorists."

A spokesman for Mr al Sanea declined to comment on the new money laundering allegations, but repeated his client's denial of any involvement in fraud or theft. A statement from the US law firm Baach Robinson and Lewis, which is representing the al Gosaibis, to the attorney general's office said: "Please be assured that you will have my clients' fullest co-operation in any investigation you may undertake. We enclose a CD containing bank records from the Bank of America account that detail the close-to $150bn that moved in and out of this account since 2002."

A spokesman for the attorney general's office said, "We have received the letter and are reviewing it." A Bank of America spokesperson said: "We are aware of the Congressman's letter. As the congressman himself stated in the letter, these are unsubstantiated allegations taken from a complaint filed between two business parties involved in a dispute. We are not a party to that action. However, we take issues of this nature very seriously and are looking into the matter. As always, we will investigate the matter and work with authorities as appropriate. We have no further comment at this time." fkane@thenational.ae